The Yin Yang of Banking, Work, Wealth, and Health

by Kevin Zeese and Margaret Flowers / April 4th, 2013

This week, the economy continues to reveal the failure of banking reform, how that failure may worsen and why we need to move toward a well-regulated, public banking system. Reports continue to show a foundering “economic recovery” that is not producing sufficient jobs. More people are talking about new ways to approach the jobs crisis and wealth divide. It was a yin yang week in the economy where economic failure may lead to real solutions.

The political power of the Big Banks is evident in the notorious Trans-Pacific Partnership. This once secret negotiation pushed aggressively by President Obama would be a gift to big finance and other transnational corporations. We explain why in TransPacific Partnership Will Undermine Democracy, Empower Transnational Corporations. The agreement will provide corporations a back door to get laws passed that they could not get passed openly on Internet freedom, protecting profits of pharmaceuticals, privatizing healthcare, undermining the environment, lowering wages of workers and more. Also, central to the agreement is further de-regulation of big finance. On the Real News, we emphasized that to pass this anti-democracy law, the president needs Congress to put aside constitutional checks and balances and “Fast Track” it by giving him Trade Promotion Authority.

Of course, the highlight of the week that triggered more discussion of public banks was Cyprus. The Lesson from Cyprus: Europe Is Politically Bankruptshows that that the European economy is at risk, but also shows that the Cyprus model of taking a portion of savings to bail out the big banks is now a viable one. Watch out Spain, Italy, Greece . . . Of course the wealthymoney launderers still have lots of places to turn after Cyprus.But the message for the rest of us, including Americans, is that it can happen here.Ellen Brown highlights a joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012 that plans for a “bail-in” (rather than a bail out) where depositors save the banks through conversion of their savings into bank stock.

Across the country, 1,300 local governments are putting future generations deep into the debt of Wall Street with bonds for building schools and public infrastructure. They are using “capital appreciation bonds” that do not require immediate payments but when the payments come due, governments end up owing much more, e.g. a 22 million loan will end up costing $154 million. Would public banks engage in such anti-public interest practices?

The only public bank in the United States in North Dakota continues to do well. The bank has existed in Republican North Dakota for more than 90 years. It helps the state’s community banks, businesses, consumers, and students obtain loans at reasonable rates while delivering a handsome profit to its owners – the 700,000 residents of North Dakota – by providing more than $70 million to the state budget. California would have an extra $3.8 billion a year in state revenues if it had a public Bank of California.

And, we can look to our history, public banking helped to make US colonies prosperous because they controlled their own money supply. Benjamin Franklin was proud of colonial “scrip,” money made by each colony without debt to bankers, and talked about it when he visited Great Britain. When the British heard this, they passed laws forbidding it in 1751 and even more so in 1763. Some blame the revolution on the colonies’ loss of control over their money supply.

It is not only public banking that is seeing advances, but also alternative currencies. This week an Internet, virtual currency, bitcoins, already bigger than many sovereign currencies, passed a mark when the bitcoin total value topped $1 billion.

If we combined prosecution of bankers and the breaking up of Big Banks with public banking, we would begin to create a finance system for the people.

The big problem, perhaps the root of many of the economic and social problems we currently face, is the wealth divide. This is made worse by a jobs crisis that includes not only high unemployment and underemployment, but also lower wage jobs that do not create wealth for workers. There are efforts to change this.

On the jobs front, Dean Baker writes that we could learn from Germany about how to reduce unemployment. Germany’s unemployment rate is about two points lower than the US even though its economy is not booming. Why? Workers work fewer hours so they have more free time, and so there are more jobs. Research shows that working fewer hours would also be good for the climate.

Reducing employer health insurance is the wrong reason to shrink hours and will cause more problems. Already, US health care costs are out of control as these 21 charts from the Washington Post show. But, even worse, a study this week predicts we might see a 30 percent premium increase in the individual insurance market. Overpriced, under-insurance is going to lead to more “death by for-profit health care” as Occupy off-shoot, Strike Debt makes clear in their report on medical debt. The solution of course, is a single payer system – improved Medicare-for-all.

All of this adds up to economic democracy – public banking for the public interest, worker owned and managed enterprises, participatory budgeting and a national program of health care for all. Perhaps out of the “yin” of economic crisis we can build a “yang” of a new economy that serves all of us, not just the tiny minority with concentrated wealth.